The TV Content Ecosystem

Last week I shared the talk I gave at MAX which described the the new ecosystem of connected TVs for the Flash developer.

I wanted to take a look at one slide specifically and expand on what the talk track from the presentation. Generally speaking if you look at most content driven ecosystems, there are three components that make up the majority of the revenue. The content, distribution of the content, and advertising on the content. This applies in the TV ecosystem just as much as anywhere else.

This diagram helps articulate the various ways that money flows through the ecosystem. It’s not perfect but it’s a 50,000 foot view on how the money flows with a focus on the fact that you, the consumer, are basically paying for everything. The arrows point out which way the money is flowing. I’ll focus in more detail on the top half, which is for broadcast TV entertainment. The bottom half/third is about movie entertainment.

Value Chain for the TV Ecosystem

Value Chain for the TV Ecosystem

Distribution & Content

In the United  States, the majority of television is watched through some Pay TV operator, whether it’s a cable company like Comcast or a satellite company like Dish. This is the distribution side of the equation. Distribution accounts for roughly $75 billion dollars of revenue in the value chain and is mostly from consumer spending. This is basically the second row of the chart.

Most of the money consumers pay goes to the cable operator and then from them to the content creator to pay for the content. Cable companies pay a different amount for each channel they carry. For example, ESPN is the most expensive channel, costing roughly $4.40 per household passed (e.g. if Comcast is available in 10 million homes, Comcast pays ESPN $14.4m per month).

Online distribution is basically the same (which is the middle row), with the OTT aggregators like Netflix paying for each stream delivered rather than each household passed. There’s a lot of change happening in the online delivery world, and 2011 will likely be quite a bit different than 2010 was. Two specific things will happen in this space. First, Netflix’s deals are about to expire which means the cost they pay for content is going to change (and likely the cost you pay for Netflix). One of the key contracts in Netflix’s arsenal is its deal with Starz for $30 million. It’s likely to cost over $200m to get that content this time around. Second, much online content will come behind a pay wall / TV-Everywhere. This means that when you want to watch a video online (say on Hulu or you may have to sign in to your Comcast account.


The other major side of the equation is advertising — which in the United States is roughly $83 billion. At the core, the pricing for advertising is based on the size of the audience you can deliver as well as who that audience is.  Top shows like Lost or Modern Family get paid for by the advertising the network (ABC) sells for each of the shows. Companies like Nielsen are in the business of measuring the audience, and based on the ratings (e.g. points) the networks price out the advertising for the show.

In a 30 minute slot, there are 22 minutes of programming and 8 minutes of ads, so 16 ads. Typically they’re organized in to what are called ad pods, and each pod contents multiple ads. For each available spot some number of the spots will go to the network’s own cross promotion (i.e. while watching Modern Family you see an ABC ad promoting the new fall lineup), local ads (likely served by the distributor), and proper ads. The ownership of the ads in the pods is often part of the distribution agreement between the TV network and the distributor.

The DVR radically changed the way that measurements of audiences has done. New metrics like C3 added in broadcast plus three days of DVR recordings to the mix to capture people time-shifting. That same kind of “+3 days” is now occurring in the online world, too. With TV Everywhere, broadcasters and measurement companies will start to blend the online and broadcast world when it comes to ratings. Since online and broadcast audiences will be measured the same, you’ll start to see the same kind of advertising happening within the C3 window and at rates blend (or are the same) between two delivery methods.

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Slides from MAX 2010 Flash Platform on TV Talk

I’m way late to this party, but better late than never. In October 2010, I gave a talk at Adobe’s MAX conference introducing the Flash Platform for TV which is Flash Player for TV and AIR for TV. Here are my slides that give a good overview of the TV ecosystem as a whole and Adobe’s products for the segment. I might extract some of this information in the future for a blog post, but the whole deck is here for your to download.

You can also see the recording of the session at the MAX 2010 archives. Unfortunately there were some recording issues with the audio so part of the audio drops out in the first part of the talk, but it’s great since you get the visuals of the demos in the archive.

Overview of the TV Ecosystem and an Introduction Flash Player for TV and AIR for TV

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Hi, I’m The Insides of Your TV

As televisions and TV service has gotten more and more sophisticated since the switch over to digital, the insides of your TV have gotten more and more complicated. What’s actually inside those TVs and how do they tick? Well, it’s both simple and complicated.

In the United States, almost all television is viewed by some pay-TV operator (think cable or satellite) and your TV acts as a display. There’s a ton of smarts and processing in the TV to smooth out the video, deblock compression artefacts, process the audio, etc. But the core part of the video experience is delivered by the cable box and delivered through the HDMI cable. Since the cable or satellite company own the entire pipe, they are normally built with custom made solutions by companies like NDS, OpenTV, and the like. A small percent watch broadcast TV in the United States (think bunny ears). In that case, specs made by the ATSC describe how the digital broadcast is supposed to work and the TV does all the heavy lifting.

In other markets, like in Europe, there is a lot of free-to-air broadcasts, and they’re specified by groups such as the Digital TV Group in the UK or DVB in Europe. Like ATSC in the US, these standards basically describe how broadcast digital TV is supposed to work, including things like the video codec, the audio codec, channel guides, any other data in the stream.

Most broadcast systems in the world currently use MPEG2 as the video codec, and can transmit in the high 10s of bandwidth per carrier, typically the US about 18 Mbps. Systems such as DVB-T2 are looking to move to H.264 as their video codec standard to more efficiently use the same amount of bandwidth.

But enough about codecs, how does it all work? It’s acutally pretty simple. Inside the TV (or cable box) there are a bunch of electronics and at the core of it is a system-on-chip or SoC. In the TV world, there are a few quite a few companies that make these SoC, such as Broadcom, MediaTek, STMicro, Trident, Intel, Zoran, MStar and probably more I can’t recall off the top of my head. These SoCs handle all the work required to make TV happen. They process the incoming stream, whether it’s a raw feed from a cable, satellite or broadcast TV feed, decrypt the streams if it’s protected, then decode the audio and video and sync it up, then sent it along, either to the display or on to the TV.

This picture is the inside of a flat planel TV. There are there major components shown here. On the far right is the logic board. On the logic board is the SoC, connectors to HDMI, cable and audio, memory chips, and a few other parts. In the middle is the power system, which powers the actual panel. On the far left is the speaker. The most impressive part of these systems is how slim hardware vendors have now managed to make everything while still retaining quality, especially around the audio from the speakers.

TVs (and set top boxes) are typically very very good at decoding and rendering video. They can typically decode Bluray quality in their sleep (to put it in context that’s roughly 39 Mbps of data), all the while doing all kinda of real time image and video processing to make it look even better. It’s really quite impressive how much data goes through a TV system in a second when rendering 1080p (1920w * 1080h * 24fps * 24bit color + 448kbps-ish of audio).

So that’s how your TV works! Easy, right?

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